Acta Univ. Agric. Silvic. Mendelianae Brun. 2013, 61(4), 981-993 | DOI: 10.11118/actaun201361040981

Financial and trade integration in the EU countries

Zuzana Kučerová
Department of Economic Policy, Faculty of Economics V©B-Technical University of Ostrava, Sokolská tř. 33, 701 21 Ostrava 1, Czech Republic

Because of the creation and enlargement of the Eurozone, the importance of monetary integration is increasing and is the subject of a number of theoretical and empirical studies. The adoption of a common currency has to be accompanied by financial market integration. The aim of the paper is to assess the relationship between financial and trade integration in the EU member countries (divided into three subsamples: EU27, EU10, and EU17) over the period 1993-2012 (and two subperiods 1993-2007 and 2008-2012). We use quantity-based measures of financial integration derived from the countries' international investment positions with a view to the foreign trade and the method of correlation analysis (including the moving correlation method). We conclude that the progress in financial integration was smaller in the EU10 countries compared to the EU16 countries, i.e. the pace of financial integration was higher in the EU16 countries than in the EU10 countries. The process of trade integration in all EU countries was not as fast as the process of financial integration. We also conclude that there is a linear association between financial and trade integration in the pre-crisis period (1993-2007), especially in the EU10 countries (compared to the EU16 countries). However, this relationship was seriously weakened by the financial crisis. Financial and trade integration are interconnected processes and should not be assessed separately. However, world trade (and thus financial integration) can be undermined by limiting trade finance as a result of tightening financial regulation and supervision after a decade of loose regulation and supervision (e.g. by the implementation of the Basel III capital framework).

Keywords: financial integration, foreign trade, international investment position
Grants and funding:

The research behind this paper is supported by the Grant Agency of the Czech Republic within Project No. 403/11/2073.

Received: November 29, 2012; Published: July 13, 2013  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Kučerová, Z. (2013). Financial and trade integration in the EU countries. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 61(4), 981-993. doi: 10.11118/actaun201361040981
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. AIZENMAN, J. and I. NOY, 2009: Endogenous Financial and Trade Openness. Review of Development Economics, 13, 2: 175-189. ISSN 1467-9361. DOI: 10.1111/j.1467-9361.2008.00488.x Go to original source...
    2. AVIAT, A. and N. COEURDACIER, 2007: The Geography of Trade in Goods and Asset Holdings. Journal of International Economics, 71, 1: 22-51. ISSN 0022-1996. DOI: 10.1016/j.jinteco.2006.02.002 Go to original source...
    3. BAELE, L., A. FERRANDO, P. HÖRDAHL, E. KRYLOVA and C. MONNET, 2004: Measuring Financial Integration in the Euro Area [online]. European Central Bank Occasional Paper, No. 14 [cit. 2012-09-22]. Available from Internet: http://www.ecb.int/pub/pdf/scpops/ecbocp14.pdf. Go to original source...
    4. EUROPEAN COMMISSION, 2011: European Financial Stability and Integration Report 2010 [online]. Commission Staff Working Paper, No. SEC(2011) 489 [cit. 2012-09-24]. Available from Internet: http://ec.europa.eu/internal_market/economic_analysis/docs/financial_integration_reports/20110412-efsir_en.pdf.
    5. GUJARATI, D. N. and D. C. PORTER, 2012. Basic Econometrics. 5th ed. New York: McGraw-Hill. ISBN 9780073375779.
    6. INTERNATIONAL MONETARY FUND, 2013: International Monetary Fund International Financial Statistics [online] [cit. 2013-04-22]. Available from Internet: http://www.imf.org/external/data.htm.
    7. INTERNATIONAL MONETARY FUND, 2013: World Economic Outlook [online]. [cit. 2013-04-25]. Available from Internet: http://www.imf.org/external/data.htm.
    8. KOSE, M. A., PRASAD, E. S. and TERRONES, M. E., 2006: How Do Trade and Financial Integration Affect the Relationship between Growth and Volatility? Journal of International Economics, 69, 1: 176-202. ISSN 0022-1996. DOI: 10.1016/j.jinteco.2005.05.009 Go to original source...
    9. KOSE, M. A., PRASAD, E. S. and TAYLOR, A. D., 2011: Thresholds in the Process of International Financial Integration. Journal of International Money and Finance, 30, 1: 147-179. ISSN 0261-5606. DOI: 10.1016/j.jimonfin.2010.08.005 Go to original source...
    10. KOTLÁN, I. and MACHOVÁ, Z., 2012: World Tax Index: Methodology and Data. DANUBE: Law and Economics Review, 3, 2: 19-33. ISSN 1804-8285.
    11. KUČEROVÁ, Z., 2009: Measuring Financial Integration in Central Europe through International Investment Positions. Eastern European Economics, 47, 4: 25-41. ISSN 0012-8775. DOI: 10.2753/EEE0012-8775470402 Go to original source...
    12. KUČEROVÁ, Z., 2011: Vliv signifikantních faktorů na integraci finančních trhů ve světle světové finanční krize. Praha: Nakladatelství ČVUT, 111 s. ISBN 978-80-86729-70-1.
    13. LANE, P. R. and MILESI-FERRETTI, G. M., 1999: The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries [online]. Centre for Economic Policy Research Discussion Paper, No. 2231 [cit. 2012-10-12]. Available from Internet: http://www.cepr.org/pubs/dps/DP2231.asp. Go to original source...
    14. LANE, P. R. and MILESI-FERRETTI, G. M., 2000: External Capital Structure: Theory and Evidence [online]. International Monetary Fund Working Paper, No. WP/00/152 [cit. 2012-10-12]. Available from Internet: http://www.imf.org/external/pubs/ft/wp/2000/wp00152.pdf. Go to original source...
    15. LANE, P. R. and MILESI-FERRETTI, G. M., 2003: International Financial Integration [online]. International Monetary Fund Working Paper, No. WP/03/86 [cit. 2012-10-12]. Available from Internet: http://www.imf.org/external/pubs/ft/wp/2003/wp0386.pdf. Go to original source...
    16. LANE, P. R. and MILESI-FERRETTI, G. M., 2007: The External Wealth of Nations Mark II. Journal of International Economics, 73, 2: 223-250. ISSN 0022-1996. DOI: 10.1016/j.jinteco.2007.02.003 Go to original source...
    17. LANE, P. R. and MILESI-FERRETTI, G. M., 2008: The Drivers of Financial Globalization. American Economic Review, 98, 2: 327-332. ISSN 0002-8282. DOI: 10.1257/aer.98.2.327 Go to original source...
    18. MUNDELL, R. A., 1973: Uncommon Arguments for Common Currencies. In: JOHNSON, H. G. and SWOBODA, A. K. (eds). The Economics of Common Currencies. London: Allen and Unwin, 395 p.
    19. RUSEK, A., 2005: Financial Integration and the New EU Member Countries: Challenges and Dilemmas. Prague Economic Papers, 2005, 1: 17-32. ISSN 1210-0455. Go to original source...
    20. SEBNEM, K. O., PAPAIOANNOU, E. and PEYDRO, J. L., 2010: What Lies Beneath the Euro's Effect on Financial Integration? Currency Risk, Legal Harmonization, or Trade? Journal of International Economics, 81, 1: 75-88. ISSN 0022-1996. Go to original source...
    21. SPIEGEL, M. M., 2009: Monetary and Financial Integration in the EMU: Push or Pull? Review of International Economics, 17, 4: 751-776 ISSN 1467-9396. DOI: 10.1111/j.1467-9396.2009.00847.x Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content